With iPhone, everybody wins: Verizon, AT&T and Apple

iPhone sales at both AT&T and Verizon Wireless were healthy enough in the first quarter of 2011 to raise this question: Does the iPhone matter more than the network it runs over?

iPhone sales at both AT&T and Verizon Wireless were healthy enough in the first quarter of 2011 to raise this question: Does the iPhone matter more than the network it runs over?

Verizon announced Thursday that it sold 2.2 million iPhone 4 units between Feb. 10 and March 31. By comparison, AT&T said Wednesday it had sold 3.6 million iPhones during the first three months of the year - sales that are proportional to Verizon's, given the extra days AT&T had.

AT&T's iPhone sales total for the first quarter also includes the iPhone 3GS, which went on sale for the bargain price of $50 with a service contract a month before Verizon sold its first iPhone 4. AT&T also sold the iPhone 4 over its own GSM/EVDO network, but still holds the iPhone 3GS exclusive. (AT&T didn't break out sales for iPhone 3GS.)

What those numbers might reflect is that no matter which network it runs over, the iPhone is simply a terrifically popular smartphone. Apple's latest quarterly results, also released on Wednesday, support that notion: Apple said it sold a record 18.6 million iPhones globally in the first quarter, the third consecutive quarterly record.

"The big message from the first quarter earnings is that Apple had a kick-ass quarter, and that the network to some extent is becoming irrelevant," said Jack Gold, an analyst at J. Gold Associates. "Customers said, 'I want an iPhone and will go to my favorite network to get it.'"

Gold added that, clearly, early termination fees and the need to buy a new iPhone that works on different network technology prevented some AT&T customers from jumping to Verizon. "That could be more than $600 with fees and a new phone, so there probably wasn't a lot of network hopping [to Verizon], but we'll see what happens when two-year contracts expire on a rolling basis in coming months.

"To some extent, there were people already on Verizon waiting for an iPhone to show up," he said. "There was clearly pent-up demand."

AT&T said last fall that it expected some disruptions when its iPhone exclusive in the U.S. ended, and executives cited that concern again on Wednesday. "Going into the quarter, we knew that with another carrier offering the iPhone for the first time, there was the possibility of some natural volatility and our mobile broadband strategy would be tested as never before," said AT&T CFO Rick Lindner.

Ralph de la Vega, CEO of AT&T Mobility, added that "even though iPhone exclusivity ended in the first quarter, the churn impact was minimal." He noted that the 3.6 million iPhone activations were up by 1 million from the first quarter of 2010, with 23% of those subscribers new to AT&T.